Day-After Christmas Retail Sales Disappoint: Sure, Blame It On The Snow

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Day-After Christmas Retail Sales Disappoint: Sure, Blame It On The Snow
The performance of retail sales does NOT seem to be driven by the drop or rise in outside temperatures.

By Nico Isaac
Mon, 27 Dec 2010 17:30:00 ET

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The day after Christmas is to the world of retail what gravity is to planet Earth. Known as "Returns Day," "Boxing Day" (in the UK) and/or "Black Friday II," this single calendar square is historically one of the top five busiest shopping days of the year, when swarms of gift-receivers deck the malls with bills of money.

Such was not the case for this year's December 26. According to front-page headlines, the "black" in this recent "Black Friday II" (or Sunday, as in the actual day of the week) stood for dark, dour sales at the nation's leading retail stores. As for what "cooled" the public's urge for post-Xmas bargain binging -- the mainstream experts say it was all the fault of Mother Nature. Ipso Facto: a blizzardly cold front that swept across the Northeastern U.S. Here, the following news items set the snowy scene:

"Christmas Weekend Snow Killed Holiday Spending" (MarketWatch)
"Blizzard Freezes Crucial Post-Xmas Sales" (CNN Money)
"Blizzard Hurts Retailers. Shoppers Stay Home. It's like throwing a party and nobody coming." (Bloomberg)

That makes sense up unto a very fine point -- namely, where there is no consistent correlation between falling snow and falling retail sales. Take, for instance, the two-year period of 2003 to 2004. During that time, the north eastern United States endured one of the most bitterly cold winters since Wooly Mammoths roamed the earth: it included the "Great Holiday Blizzard of 2003," the biggest snowstorm on record for Boston and Baltimore -- followed by a slew of snow storms in late December 2004 that dumped "18-inches of powder along the eastern seaboard." (Associated Press, December 28, 2004.)

Yet--December 2003 saw the strongest holiday retail sales since 1999, an uptrend that continued to gain traction into 2004 and prompted can't-beat headlines like this one:

"Day after Christmas sales too hard to resist" (Elizabethton Star) -- AND -- "No Sign of Holiday Slump For Retailers" (New Zealand Herald)

Then there's the opposite weather case to consider: The unseasonably warm winter of 2006. This meteorological anomaly was well documented in the news via pictures of blooming flowers and roller-bladers in Central Park. According to records, it was the first snow-less November and December in New York City since 1877. Yet again, the end of December 2006 saw the smallest Christmas sales gain in a year, well below expectations.

For a visual illustration, the chart below plots the year-over-year change in retail sales since 1999. I've inserted a bright, blue box around the 2003-2006 period to reinforce the rising trend in 2003, and sharp reversal in 2005-6. (Chart courtesy of calculatedrisk.blogspot.com from the website: Recession.org)

In the end, the performance of retail sales does not seem to be driven by the drop or rise in outside temperatures. Could it be that our shopping patterns, just like our investment decisions, rise and fall with the waves of social mood?

Tracking social mood in market charts by identifying and forecasting the 13 known Elliott wave patterns is the very basis of Elliott wave analysis. Get the objective story on the markets today. Elliott Wave International's most popular subscription package, The Financial Forecast Service, is available online now, absolutely risk-free.

Tags: Campaign for Independent Thinking, consumer spending, Elliott Wave Principle, fundamental analysis, social mood, stimulus package

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